Demand for Narcotics in Thailand, with Policy Implications

Munich Personal RePEc Archive

Demand for Narcotics in Thailand, with

Policy Implications

Sukharomana, Renu and Chang, Chia-Lin

Institute of Social and Economic Sciences, Dhurakij Pundit

University, Department of Applied Economics and Department of

Finance, National Chung Hsing University

12 May 2017

Demand for Narcotics in Thailand, with Policy Implications

*

Renu Sukharomana

Institute of Social and Economic Sciences Dhurakij Pundit University

Bangkok, Thailand

Chia-Lin Chang

Department of Applied Economics Department of Finance National Chung Hsing University

Taichung, Taiwan

Revised: May 2017

* The authors wish to acknowledge the helpful comments and suggestions of Michael McAleer. The second author wishes to acknowledge the financial support of the National Science Council, Ministry of Science and Technology (MOST), Taiwan. Corresponding author: Chia-Lin Chang

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Abstract

The paper examines the demand for narcotic drugs, based on Becker (1968), as purported rational

behavior of human beings. The results from sampling surveys in eight provinces in Thailand in

2014, representing nationwide drug users/addicts, show that the demand for narcotics

(amphetamines, ice drug, and marijuana) are price inelastic (between -0.533 and -0.701), as well as

normal goods. The key econometric coefficients in models A and B are 0.192 and 0.0467,

respectively, and an increase in income will lead to an increase in the demand for narcotics. In

addition, factors affecting the demand for narcotics are the age and age squared of the user,

friendship, family member relationship, social relationship, reasons for drug use, risk behavior, and

expected punishment. Public policy implications are also proposed and analysed.

Keywords: Price elasticity of demand, Narcotics, Amphetamines, Ice drug, Marijuana, Policy

implications.

1.

Introduction

As in many other leading countries internationally, the Thai government has announced the

narcotics problem to be in a significant national issue. At present, the emphasis has been on various

forms of suppression to reduce the supply of narcotics, and providing opportunities to addicts in

treatment programs. With the adoption of international concepts, the Thai government has defined

narcotics addicts as patients to be treated by emphasizing the believe that, without addicts, there

would be no dealers/traders. In short, a reduction in the number of addicts is better than a

suppression of drugs (Secretariat of the House of Senate, 2015( .

Economists generally agree that the narcotics market is a special type of black market, but

estimating the demand for and the supply of goods in the black market can be singularly difficult

(see Becker, 1981). Among the reasons for the difficulty in specifiying supply and demand models

is the fact that narcotics lead to dependence or addiction, which makes rational choices based on

prices and income, among other factors, seriously problematic.

This paper conducts initial research applying economic concepts in Thailand to analyse the

behavior of narcotic traders and addicts, with the intention of providing policy implication and

recommendations. The results are given in the paper, which estimates the appropriate elesticities

using survey data and a model of demand for narcotics (hereafter called “drugs”). The empirical

results are taken from Sukharomana et al. (2015).

The remainder of the paper is organised as follows. A literature review is given in Section 2. Data

collection and a sample survey are presented in Section 3. The results and analysis are conducted in

Section 4. Concluding remarks and policy implications are presented in Section 5.

2.

Literature Review

There are three possible factors determining crimes committed including narcotic drug

crimes/users/ addicts, namely: (1) Psychological factors; (2) Physiological and biological factors;

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Diagram 1 summarizes these factors to aid in understanding drug behavior. Rational addiction

theory, as developed in Becker and Murphy (1988), explains the major factors that determine the

decision making of drug users and drug addicts, which is essentially based on rational utility

maximization. Violence in the black market of narcotic drugs in the USA has occurred since the

Harrison Narcotic Act of 1914 (Trebach, 1982; Friedman, 1991).

3.

Data Collection and Sample Survey

The data collection and analysis uses a mixed method, which allows double checking for reliability

by using not only well-prepared questionnaires, but also using in-depth interviews. Both research

tools have been certified by the Mahidol University Institute of Review Board (IRB), Thailand. The

survey teams were comprised of 22 students who are in the Nursing Program of the School of

Medicine under the supervision of staff for in-depth interviews and questionnaire surveys in eight

provinces, representing the nation from June to August, 2014.

There were a total of 2,433 observations (Table 1), which cover two groups: (i) 1,347 samples (n1)

of drug addicts in eight large provinces, namely Chiangmai, Nakornrachsima, Chonburi, Bangkok,

Songkhla, Naratiwat, Pattani, and Yala; (ii) 1,086 samples (n2) of pedestrians, namely individuals

who are randomly sampled, who were interviewed in public spaces (such as streets, markets, and

public parks). Respondents in both groups were selected using the same snow-ball technique in the

Diagram 1. Factors determining drug crimes/users/addicts

Say No to Drugs

Phenomena 2. Physical and

Biological Factors -Human Body - Biology

1. Psychological Factors

3. Socio-Economic and Cultural Factors - Family Background - Environment - Community - Culture Individual Person

Human Character

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Table 1

Sample Surveys in Eight Provinces, Thailand, 2014

Province

Samples from Survey Drug Users/

DrugAddicts

Pedestrians Total

1.Chiangmai 184 121 305

2.Nakornrachsima 195 197 392

3.Chonburi 287 103 390

4.Bangkok 410 428 838

5.Songkhla 173 100 273

6.Naratiwat 33 53 86

7.Pattani 33 46 79

8.Yala 32 38 70

Total 1,347 1,086 2,433

4.

Results and Analysis

4.1 Types of Narcotic Drugs: The three types of drugs that are the most popular in Thaland

among drug users/addicts are Amphetamines, Ice Drugs, and Marijuana. The main reason why

respondents in this paper become drug addicts are as follows: 45.3% intend to try it for the first

time, 40.5% say friends convinced them to join their gang, and 3.1% see nearby people use drugs,

which makes them want to experiment.

The price of Amphetamines varies in different places, according to transportation costs, and access

ability to drug dealer/delivery. The distance from the drug agency and/or place of drug production

seem to be major factors that determine the market price. Chiangmai has probably the lowest price,

as compared with other regions, (see Table 2). The average number of Amphetamines used per day

is 7 tablets, whereas Ice Drugs and Marijuana are used in one gram and one set per day,

respectively.

The average expenses of each type of drugs are shown in the last row in Table 2, which gives some

idea of the expenses for drug users/addicts, with Marijuana having the smallest cost, as compared

with 1.5 times higher for Amphetamines, and 2.5 times higher for Ice drugs.

4.2 Demand for Narcotic Drugs

4.2.1 Former Drug Users/ Drug Addicts, (n1=1347; Model A): Demand for narcotics

(Amphetamines) has a small response to price (between -0.533 and -0.701). Narcotics

(Amphetamines) are a normal good, so that addicts consume more as their incomes rise. Legal

punishment is not a major factor to describe the behavior of drug users or the quantity of drug use.

However, social sanctions or impacts on people around them are factors that significantly decrease

the number of drug users. A good relationship with the family is more likely to significantly reduce

drug addiction. The degree of risk aversion of the individual also determines the behavior of drug

users such that, the lower is the degree of risk aversion, the higher is the chance of drug use. Drug

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Table 2

Regions, Places and Prices of Amphetamine, Ice Drug and Marijuana

Region : Province Amphetamine

us$ / tablet

Ice Drug us$ / g*

Marijuana us$ / set

North: Chiangmai 3.0 33.41 5.0

Northeastern : Nakormrachsima 6.05 35.64 8.14

Central: Bangkok 3.70 49.42 1.27

East: Cholburi 3.50 41.62 1.65

South: Songkhla 5.22 52.57 2.95

Average price per unit 4.16 47.02 1.64

Average amount used per day 7 tablets** 1 g 1 set

Average expense per day 3.0 – 6.05 33.41 – 52.57 20.43

Note: * one g weighs approximately between 0.8 and 1 gram, depending on the drug dealer’s package for retail sales.

** The average number used per day for amphetamines is 7 tablets, whereas ice and marijuana are one gram and one set per day, respectively.

4.2.2 Pedestrians, (n2 = 1086; Model B): The main objective of the paper is to calculate the price elasticity of demand, which requires a large sample survey. The research team was suggested

by the expert committee from the Thailand Research Fund to use the catchment area of the School

of Medicine, located for students in the Nursing Program. The respondents in the paper were

located in Chiangmai, Chonburi, Songkhla and Bangkok. This paper finds that, in a sample of

1,086, 14% are drug dealers/drug delivery, 45% are drug users/addicts, while the rest (41%)

were not associated with any kind of drug.

Males are significantly more likely to be drug dealers, or delivery to females. Age and

education are statistically significantly factors determining drug user/addicts (group A), but

not for Pedestrians (group B). This might be because the respondents in group B are sampled

from predestrians who are interviewed in public places. Some respondents might not reveal

their full information as they do not trust the interviewer, as shown in Table 3.

4.3 Price Elasticity of Demand: How does behavior change when prices change?

4.3.1 Scenario I: If price increases by 100% for Amphetamines

The 455 respondents addicted to Amphetamines is the majority group in the sample. From their point

of view, Amphetamines and Ice Drugs are a necessary good. It is hypothesised that they will not

switch to other narcotic drugs because drugs impact on their health, nerves and the psyche. In addition,

one study shows that drug addicts typically stick to their tastes.

When the price of Amphetamines increases, for example, by 100% of the previous price, we find

that 59.2% of respondents do not change their behavior (which means they use the same amounts),

whereas 35.2% of respondents use a smaller amount of drugs because they do not accept the higher

prices. The figure of 59.2% is interesting as the results indicate price-inelasticity of demand. This

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Table 3

Estimated Coefficients of Drug Users (Model A) and Pedestrians (Model B)

Variable

Model A Model B Coefficient

(S.E.)

Coefficient (S.E.)

ln (price) -0.533***

(0.0471)

-0.701** (0.3216)

ln (income) 0.192**

(0.0754)

0.0467* (0.0281)

Economic status -0.169**

(0.0851)

Age -0.0646***

(0.0177)

0.00241 (0.00697)

Age squares 0.000770**

(0.000313)

-5.14e-06 (9.3e-05) Marital Status (0=Singble) 0.0892

(0.0681)

0.0731* (0.0416)

Employment Status 0.0470

(0.0580)

-0.0787 (0.0497)

Family Relation 0.00203

(0.0249)

Friendship -0.0215

(0.0273)

Social Relation -0.00400

(0.0216) Expected Punishment 7.93e-07 (8.83e-06)

-1.78e-06*** (6.84e-07) Age at First Use of Drug -0.0124*

(0.00672) Education Background (0=No Edu) 0.266 (0.229)

0.227*** (0.0433) Reason of Drug Use (0=Intend to try)

1.Accecpted by Friend -0.435* (0.258) 2.Imitate People Nearby -0.297* (0.156) Risk Behavior (0=low risk)

1.Gambling 0.132

(0.0873)

0.0747* (0.0453) 2.Against the Traffic Light 0.133*

(0.0686)

0.0663 (0.0447)

3.Fast Driver 0.145**

(0.0626)

0.0839** (0.0385) 4.Extreme Activities 0.00242

(0.102)

0.0672 (0.0798) Having Sex with Stranger without Condom 0.0202

(0.117)

0.147* (0.0844)

Constant 4.196***

(0.446)

3.245** (1.538)

Samples 1,008 1,066

R2 _{0.276 0.2237}

Source: Sukharomna et al. (2015), Tables 7 and 9, pp. 66 -69 and 73-76, respectively. Note: Figures in parentheses indicate standard errors.

Table 4

Price Increases by 100% Versus Price Decreases by 50%

Type of drug

Scenario I

Price increases by 100%

Scenario II Price decreases by 50% n

samples

Not buy*

No change

Buy less

n samples

Buy more

No change

Buy less

% % % % % %

Amphetamine 455 50.5 9.2 35.2 415 38.6 50.1 8.4

Ice drug 121 41.3 n.a. 52.1 121 29.8 54.5 7.4

Marijuana 73 24.7 20.4 16.4 73 34.8 52.2 8.7

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4.3.2 Scenario I: If price increases by 100% for Ice Drug

The 121 respondents have similar behavior to Ice Drug addicts, that is, 53.7% of respondents do not

change their behavior as they are addicts. They still use the same amount of drugs when the price

increases. Some respondents stated that they cannot reduce the amounts of drugs when the price

rises. They will become sick and experience serious nervious symtoms, as it impacts on their

neurological system and causes serious side effects. This group is sometimes called hard users.

However, about 39.7% of respondents will use a smaller amount, and substitute it with other types

of drugs. This group might be referred to as light users.

4.3.3 Scenario I: If price increases by 100% for Marijuana

The price of majurina is relatively cheaper than the other two kinds of narcotics, Amphetamines and

Ice Drugs. No matter how price changes, their behavior is still that of a normal good. Overall, the

behavior of these types of narcotic drug users are confirmed as normal and necessary goods.

4.4 Scenario II: If price decreases by 50%

We hypothesize that drug users/addicts are rational (althouigh some caveats were presented in the

Introduction). Therefore, as the price falls, drug users/addicts should use more drugs to gain higher

utility levels if narcotic drugs are normal goods. The results are shown in Table 4. Respondents

from the survey are persons with rational behavior because, as price decreases by 50%, they buy

more of all three types of drugs. For example, if we consider Amphetamines, about 38.6% buy more

Amphetamines, while only 8.4% buy less.

However, it should be noted that respondents do not change the amounts used of all types of drugs

because, as they are already addicted to a specific type of drugs, they have their own range of drug

use. No matter how the price decreases, the amount of drug use will not change, or will change very

little. Alternatively, drug addicts might buy another type of drug, as shown in the first scenario,

which is in the column of “not buy”. This group displays price inelasticity with respect to demand.

For the group that buys more when the price decreases, they display priceelasticity with respect to

5.

Conclusion and Policy Implications

The paper provided information on factors determining drug users/addicts. Four issues were

discussed and proposed, as follows:

(1) Develop an educational program, as well as launch public relations program (PR) focusing

on the harm of drug addiction among risk groups, which covers not only children, youth, and the

poor living in slums, but also those studying at all levels in education, including those who are in

the labor force and/or shown in target areas.

(2) Reduce recidivism. Schools, colleges, and universities should organize special projects for

children to spend time together in detention on field trips to a Supermax Prison, as well as allowing

children and youth to gain greater experiences from detained prisoners. This project will help

children and youth to experience examples of punishment for drug offenses.

(3) Governments should implement specific economic measures aimed at increasing direct income transfer payments, particularly to groups of drug addicts who are desensitized and risky,

such that they prefer receiving additional income for necessary expenses (such as food, medicine,

and clothes) to buying drugs.

Such transfer payment programs for those with low income to stimulate economic growth would be

considered as exceptional cases for those who have been shown to be drug users or addicts.

(4) Analyse the difficulty of a pedestrian/purposive target group earning less than 20,000 baht per

month (approximately 540 US dollars at the exchange rate of 37 baht per US$ in 2014 survey) to be

the target group of drug users/addicts. A clear identifying profile as to who is likely to be a drug

user/addict should be considered for further analysis in all income groups?.

6.

Recommendations for Further Research

(1) The analysis of policy making for drug legalization/decriminalization for some selected types of

drugs, Marijuana and Kratom is crucial, where Kratom is a tropical plant that can be found in

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(2) The examination of social measures to initiate and develop strong relationships among family

members and society may become an effective way of reducing risk involvement of drug

users/addicts.

(3) Guidelines for improving the performance of police to increase the probability of arrest of the

target group, particularly of drug traffickers is important based on the believe that it is better to

increase the severity of the punishment.

(4) Alternative ways of reducing recidivism by job opportunities that might be created by specific

government sectors and the private sector can contribute significantly to reducing drug addition and

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